Arbitration or court litigation: what is the difference?

What arbitration is

In arbitration, the parties ask a neutral tribunal, usually one or three arbitrators, to decide their dispute instead of a court. The decision is called an award, and it binds the parties.

Arbitration depends on agreement. Usually the contract contains an arbitration clause, but the parties can also agree to arbitrate after a dispute arises. In Singapore, domestic arbitrations are governed by the Arbitration Act 2001 and international arbitrations by the International Arbitration Act 1994. Many arbitrations are run under the rules of an institution such as the Singapore International Arbitration Centre (SIAC).

How the process compares

The main differences are these:

• Privacy: arbitration hearings and awards are private. Court hearings and judgments are generally public.
• Control: in arbitration, the parties can choose the arbitrators, the rules and how the hearing is run. Court cases follow the Rules of Court.
• Expertise: parties can appoint arbitrators with knowledge of the industry or subject matter.
• Other parties: in court, third parties can be joined to the case. In arbitration this is much harder without their consent.

Finality and appeals

An arbitral award is final in most cases. It can be challenged only on limited grounds, which usually concern procedural unfairness rather than disagreement with the tribunal's view of the facts or the law. In practice, the parties have one chance to have the merits decided.

Court judgments can usually be appealed to a higher court. Some see this as an advantage, because errors of law can be corrected.

Enforcement, at home and abroad

Singapore is a party to the New York Convention, under which awards made in Singapore can be enforced in many other countries. Courts in those countries generally enforce an award without reopening the tribunal's reasoning.

Enforcing a Singapore court judgment abroad can be harder, because there is no equally wide treaty for court judgments. For parties with assets overseas, this can be a deciding factor.

Within Singapore, an award can be registered with the court and enforced like a court judgment.

Cost and time

Arbitration can be quicker than court and its procedure more flexible, but the parties must also pay the arbitrators and, where relevant, the institution. Complex, high-value arbitrations can be expensive. Which route costs less depends on the dispute.

Checking your contract

If your contract has an arbitration clause, it will usually decide the question for you. Even a shareholders' agreement may contain one. It is worth checking the dispute resolution clause before taking any formal step, because starting in the wrong forum can cause delay and extra cost.

Getting advice on your situation

Whether arbitration or court suits a dispute depends on the contract, the parties, where their assets are and what outcome is needed. A lawyer can review the dispute resolution clause and explain the options.